The impact of Israel’s largest multi-sector conglomerates should be measured in terms of these companies’ impact on decision makers, states an official committee to limit economic concentration.

The committee began work two years ago, under the leadership of Antitrust Authority head Michal Halperin, and was legislated under the Economic Concentration Law in 2013. On Wednesday, the committee published the first draft of its policy, which seeks to define concentration that affects the entire economy, and not just within specific sectors.

The law was intended to limit the power of the 20 families who controlled Israel’s economy at the time, and had been intended to instruct the government which businesses should be blocked from submitting bids for privatization tenders or permits. It cited concerns that the influence of the most powerful companies could impact Israel’s growth and damage the country’s democracy.

Mozes in mind

The report makes no mention of Yedioth Ahronoth publisher Arnon Mozes, who is currently embroiled in an investigation along with Prime Minister Benjamin Netanyahu over allegations that Netanyahu offered to limit circulation of the free daily Israel Hayom, a rival of Yedioth, in exchange for more favorable coverage in Mozes’ newspaper.

Yet Halperin’s work implicitly names Mozes as one of the strongest wielders of concentrated power in Israel. It’s not that we hadn’t known that, but the draft further illustrates the meaning of Mozes’ bargaining power vis-a-vis the country’s decision makers.

Halperin proposes defining economy-wide concentration as “obtaining bargaining power vis-a-vis policy makers.” The document goes on to describe several indications that an individual or group has power vis-a-vis policy makers. One of the clear examples: “Pressure on decision makers can include having a holding in a news media company. These holdings were identified by lawmakers as impacting economy-wide concentration.”

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What Netanyahu realized ages ago is finally being stated in an official regulatory document. The document goes on to state, “The media has a major influence on setting the public discourse via its decisions to report – or not to report – on specific subjects, or how it presents them.” This illustrates the strength of media organizations, their owners and their funders – including advertisers – and their ability to impact decision-makers, it states.

Halperin proposes defining holding a media outlet as one of the signs of an individual or entity with concentrated economic power.

“Control of or a significant holding in a media outlet that presents news to the public could be considered as a significant means of strengthening a player’s influence vis-a-vis decision makers,” the document states, explaining, “The concern behind the thesis of economy-wide concentration is the use of bargaining power exercised on decision makers,” including regulators and elected officials.

The result of this influence on decision makers, as stated in the document, could be applied directly to the Mozes-Netanyahu allegations: “Decisions made about a certain player’s field would give him an advantage over others,” it states. This could include a player using his bargaining power to ensure that regulations give his product preference over others, or ensuring that he receives government grants. “Regulations that grant advantages to one player at the expense of another, due to factors that are not based on economic efficiency, harm sectoral competition and the principle of fairness.”

Often the public doesn’t know what options are under consideration, and doesn’t know to protest.

Despite the coincidental timing of the report’s publication, it may have a significant impact on the Mozes-Netanyahu affair. The principle that holding a media company entails outside influence on decision makers could be considered an aggravating factor in Mozes’ alleged behavior toward Netanyahu, and increase the severity of the criminal allegations regarding what may be an attempt to bribe a prime minister. The Antitrust Authority has just explained to the police that the responsibility of an alleged bribery attempt by Mozes, who controls a major media outlet, is not equal to the responsibility of others who lack such holdings.

On the flip side, if Netanyahu is under suspicion of breach of trust, then committing breach of trust on behalf of someone with outsize influence due to his media holdings is a further betrayal of the public interest.

Surprising omission

Surprisingly, the draft neglects to mention the direct economic impact these multi-sector conglomerates have on Israel’s economy, and goes easy on the families who control Israel’s largest businesses in terms of allowing them to participate in government tenders.

Instead, it limits itself to the impact on decision makers, regulators and politicians. It mentions economic impact in passing, citing a study underway by the Bank of Israel. The study is currently only in early stages, but once it advances and the bank creates a model for measuring macroeconomic impact, the committee will consider incorporating it into its work, the document states.

The document contains many ways in which the country’s strongest families could participate in government tenders, even though it’s highly doubtful this was the intent of the original law.

Halperin explains the logic in the document’s introduction, stating, “The innovative nature of the Concentration Law (which has no precedent in other countries) is equaled by the caution necessary in applying it. Uncontrolled reliance on considerations of concentration to block parties applying for rights or permits, or seeking to buy assets from the government, even when these parties are considered sources of concentration, may become a double-edged sword and harm economic growth.”

Yet she notes, “At the same time, we must remember that the profits from granting rights to a source of concentration may be easily measured in the short term, the damage from increasing Israel’s economic concentration will occur over a longer term, and will be more difficult to measure.”

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